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Oolutiori  ot  tqe 


urrferieaq  Kailroad  S\usterr(. 


AN    ADDRESS    BY 


JOSEPH    NIMMO,   JR., 


BEFORE    THE 


WORLD'S  CONGRESS   AUXILIARY 


WORLD'S  COLUMBIAN  EXPOSITION  OF  1893. 


DELIVERED    AT    CHICAGO.    ILL, 
June  22,    1893. 


3^S 
Nfe\e 


The  Evolution  of  the  American  Railroad 

System. 


An   Address  by  Joseph   Nimmo,  Jr.,  before   the  World's  Con- 
gress Auxiliary  of  the  World's  Columbian  Exposition, 
Delivered  at  Chicago,  III.,  June  22d,  1893. 


In  addressing  this  Congress  upon  a  topic  so  broad  and 
so  comprehensive  as  The  Evolution  of  the  American  Rail- 
road System  it  is  of  course  necessary  to  confine  ray  atten- 
tion to  some  special  treatment  of  the  subject,  and  to  some 
particular  line  of  thought  embracing  the  history  of  railroad 
transportation  from  its  genesis  in  the  United  States,  about 
the  year  1830,  to  the  present  time.  I  shall  therefore  ask 
your  attention,  first,  to  some  of  the  conditions  which  consti- 
tute the  environment  of  the  American  Railroad  System  and 
which  prescribe  the  law  of  its  being,  and,  second,  to  the  cir- 
cumstances under  which,  and  the  acts  by  which,  the  physical 
unity  of  that  system  has  been  accomplished. 

The  railroads  first  constructed  in  this  country  gave  but 
Blight  notice  of  the  conditions  under  which  transportation  by 
rail  is  being  conducted  in  this  centennial  year  1893.     It  was 


300563 


for  several  years  a  debated  question  as  to  whether  the  owners 
and  managers  of  Railroads  ought  to  be  allowed  also  to  own  and 
manage  the  vehicles  and  the  motors  employed  upon  them 
in  the  work  of  transportation.  But  the  lessons  of  experience 
soon  solved  that  question.  Every  consideration  of  economy, 
of  safety,  and  of  public  convenience  pointed  to  an  undivided 
corporate  ownership  and  a  common  management  of  roadway 
and  equipment,  and  accordingly  that  has  become  the  estab- 
lished law  of  railroad  development.  Then  the  question  was 
agitated  for  several  years  as  to  whether  this  new  and  won- 
derfully potential  instrument  of  commerce  should  or  should 
not  be  owned  and  operated  by  the  several  States  of  the 
Union  in  order  to  avoid  the  danger  of  allowing  private  cor- 
porations so  highly  endowed  with  the  control  of  commerce 
to  set  their  own  interests  up  above  the  public  interests. 
The  experiment  of  State  ownership  and  management  of 
railroads  was  tried  in  six  States,  viz  :  Massachusetts,  Michi- 
gan, Pennsylvania,  Illinois,  Indiana,  and  Georgia.  These 
attempts  at  governmental  ownership  and  management  were 
made  at  a  time  when,  as  hereinafter  indicated,  the  governing 
conditions  were  much  more  favorable  to  success  than  they 
are  at  the  present  time,  and  yet  all  these  experiments  re- 
sulted in  absolute  failure.  From  a  purely  economic  and 
commercial  point  of  view  they  demonstrated  the  wisdom  of 
remitting  the  entire  work  of  railroad  construction  and  opera- 
tion to  private  enterprise,  and  they  also  proved,  beyond 
the  shadow  of  a  doubt,  that  the  political  institutions  of  this 
country  are  not  adapted  to  the  successful  administration  of 
transportation  by  rail. 

Several     States    of    the    Union     besides     those    above 


5 

mentioned  made  large  loans  ami  grants  of  lands,  or  became 
stockholders  in  railroads,  from  correct  views  as  to  their 
enormous  powers  for  developing  the  natural  resources  of 
tli9  country  ;  but  such  States  prudently  refrained  from  any 
attempt  at  State  management  of  railroads.  The  State  of 
Virginia,  for  example,  was  at  one  time  a  subscriber  to  two- 
fifths  of  the  stock  of  certain  railroads  and  canals,  but  was 
never  tempted  into  the  experiment  of  State  railroad  manage- 
ment. The  State  of  Missouri  became  the  owner  of  several 
railroads  upon  the  default  of  their  obligations  to  the  State, 
but  the  results  of  State  ownership  in  other  States  deterred 
the  people  of  Missouri  from  the  attempt  to  repeat  such  ex- 
periments. Accordingly  the  railroads  thus  acquired  by 
foreclosure  were  sold  in  the  year  1868  to  private  corpora- 
tions. 

The  general  tendency  of  all  the  States  of  the  Union  during 
the  last  thirty  years  has  been  to  withdraw  entirely  from  any 
sort  of  financial  association  with  railroad  construction  or 
management. 

But  these  attempts  at  State  control  of  railroad  transporta- 
tion cut  a  small  figure  in  the  otherwise  unbroken  evolution 
of  the  American  Railroad  System  under  the  plan  of  inde- 
pendent corporate  ownership  and  control  of  both  the  road- 
way and  the  equipment  employed  upon  it. 

Until  about  the  year  1850  the  railroads  of  the  United 
States  were  practically  autonomies  in  the  work  of  transpor- 
tation ;  that  is  to  say,  each  line  had  an  independent  terri- 
torial traffic  area,  and  in  all  matters  relating  to  rate-making 
and  general  management  was  independent  of  all  other  rail- 
road companies.     But   this   state  of  affairs  rapidly  passed 


6 

into  a  condition  of  the  most  extended  and  complex  combina- 
tion and  co-operation,  and  of  the  most  intense  competition. 
Competing  lines  were  rapidly  constructed  between  all  the 
more  important  sources  of  traffic.  Many  of  these  lines  were 
constructed  in  competition  with  canals,  and  with  rivers  and 
other  natural  waterways.  The  tracks  of  coterminous  lines 
were  also  connected,  so  that  in  time  the  railroads  of  the 
country  formed  one  intimately  connected  network  of  trans- 
portation lines. 

This  concatenation  of  railroad  lines  has  by  an  imperious 
force  of  circumstance,  independent  of  any  intent  on  the  part 
of  railroad  owners  and  managers,  led  up  to  the  evolution  of 
the  American  Railroad  System,  which  to-day  presents  itself 
to  the  commercial,  industrial,  and  social  interests  of  the 
country  as  practically  one  system  of  transportation  with 
respect  to  travel  and  the  transportation  of  merchandise 
and  the  mails. 

It  is  my  present  purpose  to  point  to  the  more  important 
circumstances  and  conditions  attending  this  evolution,  and 
briefly  to  describe  the  commercial  and  physical  forces  whose 
interaction  has  evolved  economic  laws  which  to-day  deter- 
mine the  course  and  govern  the  conduct  of  the  internal 
commerce  of  the  United  States. 

Practical  Difficulties  which  have  Arisen  in  the  Course  of 
the  Development  of  the  American  Railroad  System. 

The  fact  that  the  railroad  is  an  avenue  of  commerce,  the 
pathway  of  which  is  no  wider  than  the  wheel  of  the  vehicle 
which  moves  upon  it,  at  the  very  outset  forbade  that  it  should 


become  in  the  ordinary  sense  a  free  highway.  This  physi- 
cal disability,  if  such  it  may  be  termed,  developed  new  expe- 
riences and  led  to  important  modifications  of  the  law  of  the 
common  carrier  in  its  application  to  railroad  transportation. 

As  lines  were  extended  and  connected,  and  as  competing 
roads  were  constructed,  the  transportation  interests  of  the 
United  States  rapidly  assumed  a  degree  of  complexity  which 
transcended  the  ability  of  the  most  intelligent  to  understand, 
and  baffled  the  skill  of  the  most  adroit  railroad  managers  to 
carry  into  execution  any  proposed  scheme  of  administration. 
Railroad  managers  were  at  their  wits'  end.  For  years  wars 
of  rates  prevailed  extensively  and  receipts  from  traffic  were 
greatly  reduced.  Many  railroad  companies  were  driven  into 
bankruptcy  and  others  were  seriously  embarrassed. 

The  precise  difficulty  which  confronted  the  railroad  in- 
terests of  the  country  was  that  as  railroad  lines  were  extended 
and  competition  among  them  was  developed  the  vitally  im- 
portant matter  of  determining  rates  was  remitted  to  so- 
liciting agents  in  all  parts  of  the  country — a  class  of  men 
neither  amenable  to  the  caution  which  attaches  to  ownership 
nor  governed  in  the  exercise  of  their  discretionary  powers  by 
any  general  line  of  policy,  presumably  at  least,  directed  to 
the  object  of  conserving  the  interests  of  the  corporations  by 
which  they  were  employed.  This  proceedure  was  not  an 
expression  of  caprice,  or  of  any  vicious  propensity  on  tin- 
part  of  railroad  managers.  It  was  dictated  by  a  force  of 
circumstance  and  a  compulsion  of  environing  conditions 
entirely  beyond  their  control,  and  it  constituted  a  phase  in 
the  processes  of  a  mighty  evolution.  In  the  course  of  time 
published  freight  tariffs  furnished  to  the  public  no  reliable 
information  whatever  as  to  the  actual  rates  charged. 


8 

The  commercial  and  industrial  interests  of  the  country 
suffered  from  this  state  of  affairs  even  more  than  did  the  rail- 
road companies.  Discriminations  as  between  shippers  under 
like  conditions  became  the  rule,  and  rate-making,  in  almost 
all  cases,  became  a  mere  matter  of  contrivance  as  between 
individual  shippers  and  an  army  of  irresponsible  soliciting 
freight  agents.  Mr.  Albert  Fink,  one  of  the  ablest  railroad 
managers  of  the  country,  thus  described  the  manner  in  which, 
by  the  practical  abrogation  of  their  authority,  the  proprie- 
tors of  railroads  lost  the  power  of  determining  what  they 
should  be  paid  for  the  services  rendered  by  them  to  the 
public : 

"  The  stockholders  in  the  first  place  surrender  their  con- 
trol to  a  board  of  directors,  the  board  of  directors  surrender 
it  to  the  president,  the  president  surrenders  it  to  a  general 
manager,  who  in  turn  surrenders  it  to  the  general  freight 
agents  of  his  own  and  a  great  number  of  other  roads,  who 
again  surrender  it  to  a  large  number  of  soliciting  agents,  and 
finally  these  soliciting  agents  surrender  it  to  the  shippers. 
The  shippers  practically  make  their  own  rates.  The  result 
is  confusion  and  demoralization  of  traffic,  and  no  end  to  un- 
just discriminations  between  shippers  and  localities." 

The  general  freight  agents  also  made  special  secret  con- 
tracts with  the  larger  shippers  for  months  in  advance  as  to 
the  rates  which  they  should  pay.  No  shipper  knew  on  one 
day  what  rates  would  prevail  on  the  next,  nor  had  he  any 
idea  as  to  the  rates  which  his  competitors  in  trade  were  pay- 
ing for  transportation  services.  Thus  the  whole  matter  of 
freight  charges  became  involved  in  incertitude.  Falsehood 
and  deception  became  the  rule  and  fair  dealing  the  exception. 


This  state  of  affairs  was,  of  course,  utterly  demoralizing  to 
trade.  It  was,  also,  glaringly  in  contravention  of  the  great 
fundamental  law  of  commercial  ethics,  that  in  the  competi- 
tive struggles  of  life  men  shall  be  permitted  to  live  and  labor 
in  an  open  field  and  in  a  pure  atmosphere.  Loud  and  bitter 
complaints  arose  on  account  of  the  outrageous  discrimina- 
tions made  in  rates. 

A  more  serious  result,  however,  arose  from  the  fact  that 
glaring  discriminations  were  made  as  between  different 
localities  and  trade  centres.  For  example,  the  rates  were, 
at  one  time,  so  much  less  from  Boston  to  the  west  than  from 
New  York  to  the  west  that  commerce  was  turned  from  the 
latter  to  the  former  city.  Shipments  in  considerable  quan- 
tities were  also  made  from  New  York  to  Chicago  via  Boston. 
This  condition  of  affairs,  of  course,  gave  rise  to  bitter  com- 
plaints against  railroad  management  generally.  Trade  and 
industry  became  demoralized  by  uncertainties  which  neither 
the  merchant  nor  the  manufacturer  could  foresee,  and  against 
which  they  could  not  provide. 

In  a  word,  the  fundamental  economic  fact  that  the  rail- 
road is  not,  and  in  the  nature  of  things  cannot  be,  a  free 
highway  of  commerce,  on  which  rates  are  determined  and 
fairly  regulated  by  unrestraiued  competition  among  common 
carriers,  had  led  up  to  a  stage  in  the  evolution  of  the  rail- 
road system  of  the  country  where  it  had  gotten  beyond  all 
control.  If  this  state  of  affairs  had  continued  much  longer 
all  the  railroads  of  the  country  would  probably  have  been 
absorbed  by,  and  districted  among,  three  or  four  great  cor- 
porations. But  that  would  have  been  calamitous,  for  it 
would  have  involved  the  danger  of  an  absolute  governmental 


10 

control  of  the  railroads  with  all  the  evils  incident  to  such 
exercise  of  power. 

It  seemed  for  awhile  as  though  the  evolution  of  the 
American  Railroad  System  had  proceeded  beneficially  up  to 
a  certain  point  and  then  fallen  into  irretrievable  disorder. 
And  yet  it  was  too  absurd  for  serious  thought  to  assume  that 
the  men  of  this  generation  had  created  a  vast  and  potential 
system  of  transportation  which  they  lacked  the  virtue  or 
ability  to  administer.  At  last  the  dearly  bought  lessons  of 
experience  clearly  proved  that  all  the  troubles  just  recounted 
were  necessary  for  the  inculcation  of  the  fundamental  truth 
that  transportation  upon  a  highly  organized  and  sharply  con- 
ditioned artificial  highway  of  commerce,  such  as  the  railroad, 
cannot  be  regulated  by  laws  which  totally  different  experi- 
ences have  proved  to  be  just  and  beneficial  in  the  govern- 
ment of  transportation  on  free  highways  of  commerce.  The 
men  of  this  generation  were  simply  summoned  by  those 
very  troubles  to  the  task  of  formulating  and  giving  expression 
to  laws  evolved  by  the  new  commercial  and  economic  experi- 
ences. But  all  this  is  merely  a  fresh  chapter  in  the  old,  old 
story  of  human  progress  guided  b}r  rough  experiences. 

Certain   Established  Regulations  of   Transportation  by 

Rail. 

The  more  important  of  the  new  rules  evolved  as  the 
experimental  law  of  the  railroad  are  as  follows. 

1.  The  publication  of  freight  tariffs :  At  a  very  early 
period  in  the  history  of  railroad  transportation  the  fact  was 
developed  that  railroad  companies  must  frame  and  publish 
freight  tariffs,  presumably  in  force  until  a  new  tariff  is  pub- 


11 

lishcil.  This  was  a  departure  from  the  practice  which  hud 
alwavs  prevailed  upon  free  highways  of  commerce,  but  it 
was  clearly  seen  to  be  necessary  upon  so  constrained  a  com- 
mercial highway  as  the  railroad. 

The  laws  of  all  the  States  which  have  legislated  upon  the 
subject,  and  the  laws  of  the  United  States  enacted  for  the 
regulation  of  railroad  transportation  services,  recognize  this 
necessity.  The  publication  of  freight  tariffs  may  be  regarded 
as  the  initial  step  in  the  establishment  of  just  and  practical 
railroad  regulation,  and  as  a  proper  restraint  upon  the 
freedom  of  competition.  I  shall  waste  no  words  in  the  unnec- 
ry  attempt  to   justify  it. 

•1.  .\<j  cements  as  to  competitive  rates :  All  experience  in 
railroad  transportation  has  clearly  proved  that  agreements 
as  to  the  rates  which  shall  be  charged  for  eompetitive  traffic 
are  necessary  to  the  orderly  and  just  administration  of  rail- 
road transportation.  The  laws  of  States  and  of  the  United 
States  recognize  such  agreements  as  in  the  nature  of  just 
and  wholesome  restraints  upon  railroad  transportation.  But 
tins  regulation  goes  directly  in  the  face  of  the  rule  of  free 
competition  which  prevails  on  free  highways  of  commerce. 
It  would,  however,  be  a  waste  of  words  to  attempt  to  prove 
the  propriety  of  this  rule,  so  generally  is  it  recognized. 

3.  The  uniform  classification  of  freights  :  The  same  ex- 
periences which  gave  rise  to  the  publication  of  freight 
tariffs  and  agreements  as  to  competitive  rates,  also  led  the 
railroad  companies  to  adopt  common  classifications  of 
freight  upon  which  related  freight  tariffs  may  be  formulated. 
This  rule  or  practice  commands  general  approbation.  It  is 
also  regarded  as  a  just  and  beneficent  restraint  upon  the 


12 

freedom  of  competition  on  railroads,  although  having  no 
place  in  the  conduct  of  transportation  on  free  highways  of 
commerce.  Like  the  publication  of  rates,  and  agreements 
as  to  competitive  rates,  this  particular  restraint  upon  the 
freedom  of  railroad  competition  rests  upon  a  generally 
accepted  and  firmly  established  rule  of  public  policy.  The 
Interstate  Commerce  Commission  has  even  gone  so  far  as  to 
recommend  a  uniform  classification  of  freights  throughout 
the  country.  That  may  come,  although  it  involves  rather 
too  much  of  a  levelling  process  at  the  present  time. 

4.  Ample  public  notice  of  intended  changes  in  rates  :  Ex- 
perience has  clearly  proved  the  commercial  importance  of 
such  notice.  Changes  of  railroad  transportation  charges 
without  due  public  notice  tend  to  demoralize  trade.  Changes 
in  rates,  if  announced  only  to  favored  shippers,  constitute  a 
flagrant  and  unjust  discrimination.  But  public  notice  of 
intended  changes  in  rates  are  repugnant  to  the  law  of  unre- 
strained competition  on  free  highways  of  commerce.  The 
independent  power  to  change  rates  from  day  to  day  without 
notice  is  one  of  the  recognized  characteristics  of  the  freedom 
of  competition  on  such  highways.  The  lessons  of  experience, 
however,  have  proved  both  to  railroad  managers  and  to  the 
public  generally  that  the  restraint  of  ample  public  notice  of 
intended  changes  of  railroad  rates  is  not  only  justifiable, 
but  that  it  is  clearly  dictated  by  sound  views  of  public 
policy.  This  particular  restraint  upon  the  freedom  of  com- 
petition on  railroads  first  commended  itself  to  the  approba- 
tion of  railroad  managers,  and  it  is  now  a  fundamental 
feature  of  the  Interstate  Commerce  Act. 

Various  other  self-imposed  rules  in  the  nature  of  regula- 


13 

tions  in  restraint  of  the  absolute  freedom  of  competition  on 
railroads  have  been  instituted  by  railroad  managers,  and  the 
lrssons  of  experience,  patent  to  the  observation  of  all  the 
world,  not  only  justify  but  absolutely  demand  the  imposition 
of  such  restraints. 

The  Interstate  Commerce  Commission  is  to-day  devoting 
its  energies,  under  the  general  or  specific  requirements  of 
law,  to  the  enforcement  of  all  those  wholesome  restraints 
just  mentioned  upon  railroad  competition,  and  governmental 
regulation  to-day  abandons  as  utterly  impracticable  that  free- 
dom of  competition  in  transportation  by  rail  which  character- 
izes transportation  upon  free  highways  of  commerce.  More- 
over, every  observant  mind  clearty  perceives  that  the  specific 
restraints  upon  the  freedom  of  railroad  transportation  herein- 
before considered  are  based  upon  the  fact  that  the  railroad 
is  not,  and  in  the  nature  of  things  can  never  become,  a  free 
highway  of  commerce. 

But  all  this  is  simply  a  recognition  of  the  generally  ac- 
cepted truth  that  the  largest  and  best  results  of  our  complex 
and  refined  civilization  are  the  product  of  restraints.  We 
have  liberty  only  as  restrained  by  law.  The  discovery  and 
application  of  wholesome  restraints  upon  human  action  is 
in  fact  the  most  important  requisite  of  human  progress. 

The  adoption  and  enforcement  of  the  particular  restraints 
above  mentioned,  upon  the  freedom  of  railroad  competition, 
have  not,  however,  proved  fully  adequate  to  the  abatement 
of  the  evils  described.  Much  yet  remains  to  be  done  in 
order  to  secure  the  harmonious  working  of  the  American 
Railroad  System.  After  all  the  restraints  upon  railroad 
transportation  already  described  had  been  fully  established 


14 

the  general  freight  agents,  or  other  officers  having  the  man- 
agement of  the  freight  traffic  of  rival  roads,  would  from  time 
to  time  meet  together  and  agree  as  to  the  rates  which  should 
prevail;  but  difficulties  inherent  in  the  system  of  railroad 
transportation  frequently  rendered  null  and  void  all  such 
attempts.  It  appeared  that  whenever  agreements  for  the 
maintenance  of  rates  were  entered  into  there  was  a  mental 
reservation  on  the  part  of  the  representative  of  each  road 
that  his  observance  of  the  agreed  rate  was  conditioned  upon 
the  fact  that  his  line  was  to  secure  the  share  of  traffic  to 
winch  he  believed  it  to  be  entitled  at  each  competing  point. 
The  result,  therefore,  was  almost  invariably  that,  soon  after 
such  agreements  were  made,  the  soliciting  agents  of  one  or 
more  of  the  competing  lines  would  have  recourse  to  the  cut- 
ting of  rates,  in  order  to  make  up  the  assumed  deficiency  in 
his  share  of  the  traffic.  Usually  such  rate-cutting  was  based 
upon  representations  of  shippers,  sometimes  true  and  some- 
times false,  to  the  effect  that  Offers  of  cut  rates  had  been 
made  to  them  by  the  agents  of  competing  lines.  This  was 
a  constant  source  of  trouble  and  demoralization.  It  was 
therefore  clearly  perceived  that  some  new  restraint  must  be 
adopted  in  order  to  preserve  the  harmonious  and  beneficent 
administration  of  our  vast  and  complex  railroad  system. 
The  root  of  the  difficulty  lay  in  the  tight  by  each  company 
for  a  larger  share  of  the  competitive  traffic  than  any  other 
company  was  willing  to  grant  it.  Hence  was  evolved  out  of 
the  fierce  interaction  of  forces  the  new  law  of  self-restraint — 
agreements  as  to  the  share  of  the  competitive  traffic  which 
should  be  carried  by  each  line.  This  expedient  is  repelled 
by  independent  common  carriers  in  the  narrow  sphere  iu 


15 

which  such  carriers  compete  on  disassociated  free  highways 
of  commerce,  and  for  a  long  time  it  was  repelled  by  railroad 
managers  as  a  curtailment  of  their  liberty,  but  at  last  it  was 
seen  to  be  a  necessary  feature  of  a  just  and  proper  adminis- 
tration of  the  traffic  of  railroads  constituting  by  their  en- 
forced relationships  one  vast  and  closely  related  American 
Railroad  System.  In  a  word,  it  was  seen  that  competition 
upon  such  a  system  of  transportation  must  be  placed  in  a 
complete  harness  of  self-restraint  not  applicable  to  common 
carriers  on  turnpikes,  canals,  and  rivers. 

The  agreement  as  to  the  apportionment  of  traffic  is  the 
corollary  of  the  rate  agreement,  and  the  former  is  no  more 
in  restraint  of  competition  than  is  the  latter.  Both  restrain 
destructive  competition,  which  runs  to  disorder. 

The  question  as  to  whether  agreements  in  regard  to  the 
share  of  competitive  traffic  shall  or  shall  not  be  legalized  is, 
however,  one  which  has  been,  and  is  to-day,  hotly  contested. 
Even  men  who  concede  the  justice  and  necessity  of  the  pub- 
licity of  rates,  of  ample  notice  of  changes  in  rates,  of  the 
observance  of  agreements  as  to  rates,  and  who  acknowledge 
the  absolute  necessity  of  printed  railroad  freight  tariffs  and 
freight  classifications,  deny  the  j  ustice  and  the  necessity  of 
agreements  as  to  the  share  of  the  traffic  which  shall  be 
awarded  to  each  competitor  as  the  substantial  basis  upon 
which  the  efficacy  of  all  other  restraints  upon  the  absolute 
freedom  of  competition  must  depend.  The  logic  of  the  situa- 
tion, and  the  stern  lessons  of  experience,  force  me  to  the 
conviction  that  these  objections  to  agreements  as  to  the 
equitable  division  of  competitive  traffic  constitute  a  barrier 
to  the  progress  of   the    American    Railroad    System,  and    a 


16 

blight  upon  its  natural  and  proper  evolution.  The  history 
of  such  agreements  is,  in  brief,  as  follows  :  After  the  re- 
peated failures  of  agreements  as  to  the  maintenance  of  rates, 
in  order  to  cure  the  evils  incident  to  those  disastrous  and 
almost  continuous  wars  of  rates,  which,  as  already  explained, 
threw  the  internal  commerce  of  the  country  into  confusion, 
it  was  conceded  by  certain  able  railroad  managers,  who  had 
carefully  studied  the  situation  and  who  had  acquainted 
themselves  with  the  philosophy  of  its  teachings,  that  unless 
the  companies  should  first  agree  as  to  the  share  of  the  com- 
petitive traffic  which  each  was  to  secure,  agreement  as  to 
the  maintenance  of  rates  would  be  useless.  It  was  proved 
to  them  that  the  receipts  from  competitive  traffic  under  a 
fair  apportionment  would  exceed  the  receipts  from  even  a 
larger  share  of  it  which  might  possibly  be  secured  during  a 
war  of  rates.  It  is  also  a  fact,  attested  by  the  leading  com- 
mercial bodies  of  this  country,  that  agreements  as  to  the 
division  of  traffic  have  secured  the  just  and  equitable  con- 
duct of  the  railroad  transportation  interests  of  the  country. 
Besides,  rates  reasonably  remunerative  to  the  carriers,  com- 
mon to  all  shippers,  and  steadily  maintained,  are  found  to 
be  infinitely  better  for  the  general  good  of  the  country  than 
even  much  lower  rates,  unjustly  discriminating  and  wildly 
fluctuating,  and  which  inevitably  lead  to  disorder  and  the 
demoralization  of  trade.  This  is  not  theory,  nor  can  it  be 
refuted  by  theory.  It  is  fact,  inculcated  by  the  hard  lessons 
of  actual  experience. 

It  was  only  after  much  opposition  and  many  infractions 
of  agreements  as  to  the  division  of  traffic  that  the  dissenting 
companies  were  forced  to   the  confession  that  the   loss  of 


17 

their  independence  which  suoh  agreements  involve  consti- 
tutes a  wholesome  restraint  upon  the  freedom  of  competition. 
And  I  believe  that  the  public  mind  is  rapidly  coming  to  the 
conclusion  that  such  restraint  of  competition  is  justified  by 
sound  views  of  public  policy  drawn  from  the  lessons  of  a 
protracted  and  stern  experience.  When  the  people  of  this 
country  come  to  realize  this  important  truth,  as  they  cer- 
tainly will,  and  to  impose  upou  their  representatives  in  legis- 
lative assemblies  the  duty  of  conforming  the  laws  of  the 
country  to  this  clearly  evolved  law  of  the  American  Rail- 
road System,  then,  and  not  until  then,  will  that  system  be- 
come an  orderly  and  self-regulated  institution. 

The  experiences  already  recounted  have  proved  beyond  all 
reasonable  doubt  that  free  competition  among  railroads  in 
the  manner  and  to  the  extent  that  it  is  practised  by  common 
oarriers  on  free  highways  of  commerce  is  utterly  impractica- 
ble. Railroad  transportation  must  therefore  be  subjected  to 
such  restraint  as  the  lessons  of  experience  have  proved  to  be 
just  and  necessary.  I  strenuously  maintain  that  the  accept- 
ance of  this  general  truth  is  preliminary  to  the  proper 
adjustment  of  the  railroads  to  the  public  interests. 

It  is  unfortunate  that  in  giving  the  force  of  legality  to  so 
much  which  experience  had  proved  to  be  just  and  beneficent 
the  legislator  should  have  gone  astray  in  regard  to  a  clearly 
established  law  of  the  American  Railroad  System  which  had 
been  forced  upon  railroad  managers  by  the  logic  of  events. 
I  refer  to  the  fact  that  the  fifth  section  of  the  Interstate 
Commerce  Act  forbids  such  agreements,  and  thereby  incites 
the  railroads  to  the  violation  of  every  beneficent  provision 
of  the  statute. 


18 

The  specious  objection  is  urged  to  agreements  as  to  the 
division  of  traffic,  that  they  are  similar  to  agreements  made 
for  the  suppression  of  competition  and  for  establishing 
monopolies  in  commercial  and  industrial  pursuits.  It  ap- 
pears to  be  a  sufficient  answer  to  such  objections  to  say  that 
combinations  of  every  character  which  tend  to  forward  the 
beneficent  enterprise  of  the  age  are  aiso  employed  for  evil 
purposes.  Knives  are  instruments  of  great  utility,  and  their 
use  is  not  to  be  proscribed  because  they  are  sometimes  em- 
ployed to  do  murder  and  to  commit  suicide. 

There  are  gentlemen  in  this  city  and  in  this  section  of  the 
country — journalists  and  men  in  public  life — who  have  con- 
troverted and  still  stoutly  controvert  the  views  just  expressed. 
— views  which,  as  government  officer  and  as  private  citizen,  I 
have  been  forced  to  accept  as  the  result  of  laborious  investi- 
gation and  scrutiny.  While  I  have  no  doubt  whatever  as  to 
the  absolute  sincerity  of  those  gentlemen,  and  while  I  enter- 
tain the  highest  respect  for  their  ability  to  discuss  public 
questions,  I  am  as  firmly  convinced  that  they  are  in  error 
as  I  am  of  anything  ;  nor  can  I  possibly  doubt  that,  one 
and  all,  they  will  be  brought  by  farther  investigation  or 
by  the  irresistible  logic  of  events  to  see  their  error.  In  this 
connection  it  is  with  great  pleasure  that  I  advert  to  the  fact 
that  the  Honorable  John  H.  Eeagan,  President  of  the  Rail- 
road Commission  of  Texas,  has  been  brought  by  his  careful 
investigations  and  observations  as  a  commissioner  to  concede 
that  agreements  as  to  the  division  of  competitive  traffic, 
under  proper  conditions  of  regulation,  are  just  and  beneficial 
toward  the  public  interests.  This  concession  illuminates  the 
public  records  of  Mr.  Reagan,  who,  as  Representative  in  Con- 


19 

gress  aud  as  Senator  of  the  United  States  from  Texas,  threw 
the  full  weight  of  his  great  influence  against  the  legalization 
of  agreements  in  regard  to  the  division  of  competitive 
traffic. 

The  cause  and,  as  I  firmly  believe,  the  only  potential 
cause  of  the  popular  prejudice  against  agreements  as  to  the 
division  of  competitive  traffic  has  arisen  from  the  fact  that 
to  such  agreements  was  applied  in  the  very  beginning  the 
inappropriate  and  offensive  appellation  of  pooling. 

It  is  manifest  that  if  agreements  as  to  the  apportionment  of 
traffic  shall  be  legalized,  they  should  be  guarded  by  all  the 
provisions  of  the  act  to  regulate  commerce  relative  to  the 
publication  and  maintenance  of  joint  rates — provisions 
which,  in  the  hands  of  sensible  railroad  managers,  would 
become  efficient  instruments  of  self-government. 

Ouoanized  Measures  for  Securing  the  Orderly  Conduct 
of  the  American  Eailroad  System. 

No  organization  of  human  devisement  can  exist  as  a  force- 
ful entity  in  the  absence  of  an  intelligent  directory.  The 
American  Railroad  System  is  not  a  thing  which  can  run 
alone.  Its  existence  involves  conventional  agreements  and 
co-operative  arrangements  for  the  maintenance  of  such  agree- 
ments, touching  almost  innumerable  matters  of  detail.  Hence 
the  federation  of  the  railroads  by  means  of  associations  of 
various  sorts  followed  as  a  necessary  step  in  the  processes 
of  that  evolution  which  was  to  bring  them  all  into  practical 
uuity.  Certain  of  these  federative  organizations  are  based 
upon  the  idea  of  managing  the  traffic  of  great  geographical 
areas,  while  others  take  cognizance  of  great  traffic  currents. 


20 

There  are  also  associations  which  have  for  their  object  the 
management  of  through  cars — i.  e.,  car-service  associations  ; 
other  associations  have  the  management  of  through  tickets, 
of  baggage  and  baggage  checks,  etc.  There  are,  besides, 
claim  associations  and  local  associations  of  various  sorts. 
These  associations  constitute  the  mind  or  administrative 
thought  of  the  American  Railroad  System.  Their  function 
embraces  the  classification  of  freights,  freight  tariffs,  joint 
rates,  traffic  facilities,  the  apportionment  of  traffic,  receipts 
from  traffic,  and  a  thousand  matters  of  detail  involved  in  the 
administrative  management  of  a  great  transportation  system. 

Railroad  traffic  associations  take  cognizance  of  agreements 
in  regard  to  joint  traffic  over  connecting  and  co-operative 
lines,  and  also  of  agreements  between  rival  lines  in  regard  to 
competitive  traffic.  Such  associations,  besides,  attend  to  the 
enormous  work  of  adjusting  joint  traffic  accounts  ;  that  is  to 
say,  they  are  clearing-house  establishments. 

Thus  the  law  of  organic  efficiency  has  been  to  a  very  great 
extent  substituted  for  the  law  of  unrestricted  competition. 
This,  of  course,  has  involved  a  considerable  sacrifice  of  inde- 
pendent corporate  power.  But  when  men  organize  for  the 
accomplishment  of  any  great  work  they  most  always  surren- 
der something  for  the  purpose  of  gaining  something  which 
eludes  disassociated  effort. 

The  thing  of  chief  public  interest  attained  by  the  federa- 
tion of  the  railroads  was  the  maintenance  of  order  in  the 
conduct  of  the  internal  commerce  of  the  country.  The  time 
had  come  when  the  alternative  confronted  the  people  of  this 
country — the  maintenance  of  order  or  the  maintenance  of 
the  absolute  freedom  of  competition.     Order  is  not  only 


21 

heaven's  first  law,  but  it  is  a  vital  condition  of  all  living. 
Competition,  on  the  other  hand,  is  only  a  manifestation  of  liv- 
ing under  favoring  conditions.  And  yet  much  of  the  reason- 
ing of  the  present  day  would  place  the  maintenance  of  a  wild 
and  destructive  competition  above  the  maintenance  of  order. 
That  is  a  great  mistake.  When  competition  becomes  so  fierce 
that  it  degenerates  into  disorder  it  passes  the  acme  of  its  pos- 
sibilities and  becomes  the  very  swoon  of  existence — the  syn- 
cope of  effort. 

With  the  exception  of  agreements  as  to  the  apportionment 
of  competitive  traffic,  all  the  self-imposed  restraints  upon 
railroad  competition  enforced  by  railroad  associations  are 
now  fully  recognized  by  the  Act  to  Eegulate  Commerce,  and 
by  the  Interstate  Commerce  Commission  as  expressions  of 
American  common  law  touching  the  subject  of  railroad  trans- 
portation. 

The  Eegulation  of  Competition. 

The  experience  of  centuries  prior  to  the  advent  of  the 
railroad  had  firmly  engrafted  into  the  minds  of  the  English- 
speaking  race  the  rule  of  public  policy  known  as  the  freedom 
of  the  highway.  By  the  freedom  of  the  highway  is  meant 
the  freedom  enjoyed  by  every  man  to  operate  his  vehicle  of 
commerce  upon  free  higtiwaj's  in  competition  with  all  other 
carriers. 

As  the  regulation  of  competition  involves  a  fundamental 
condition,  under  which  the  evolution  of  the  American  Bail- 
road  System  has  proceeded,  it  appears  proper  to  give  to 
that  subject  some  particular  notice  in  this  connection.  Al- 
though the  fact  is.  ami  almost  from  the  beginning  has  been, 


22 

clearly  recognized  that  the  railroad  is  not,  and  by  virtue  of 
its  peculiar  physical  characteristics  can  never  become  a  free 
highway  of  commerce,  yet  many  cling  tenaciously  to  the  idea 
that  competition  must  be  absolutely  unrestrained  upon  rail- 
roads in  order  to  protect  the  public  interests  against  unjust 
discriminations  and  exorbitant  rates.  Two  favorite 
aphorisms  have  served  to  crystallize  these  ideas  in  the  public 
mind,  viz :  First,  that  competition  is  the  life  of  trade,  and, 
second,  that  where  combination  is  possible  competition  is  im- 
possible. The  first  of  these  aphorisms  has  been  proved  by 
the  light  of  modern  experiences  to  be  utterly  misleading. 
The  spirit  of  competitive  enterprise  is  undoubtedly  a  stimu- 
lus to  action  ;  but  under  the  influences  of  the  telegraph,  the 
railroad,  and  all  the  enginery  of  modern  commerce,  experi- 
ence has  proved  that  the  stimulus  of  competition,  like  every 
other  stimulus,  may  be  so  strong  as  to  run  to  demoralization 
and  disorder.  In  the  proper  adjustment  of  human  affairs 
too  much  impetus  is  often  found  to  be  as  prejudicial  to  the 
public  welfare  as  a  lack  of  impetus.  This  fact  is  constantly 
being  illustrated  in  those  periods  of  financial  and  commer- 
cial wreckage  and  stagnation  which  follow  periods  of  unduly 
stimulated  activity.  It  is  now  perfectly  clear  that  the 
intense  forces  of  the  present  day  not  only  justify  but  abso- 
lutely demand  the  regulating  influence  of  restraint  in  order 
to  prevent  railroad  competition  from  running  to  disorder, 
involving  the  demoralization  of  trade  and  the  ruin  of  rail- 
road companies.  This  is  not  theory,  but  the  indisputable 
record  of  history.  The  mischievous  fallacy  that  "  competi- 
tion is  the  life  of  trade  "  was  years  ago  denounced  in  a 
learned    and    elaborate    opinion    by    Judge    Howe,*   of  the 


(Afterwards  Senator  Howe,  of  Wisconsin.) 


23       . 

Supreme  Court  of  Wisconsin,  in  the  case  of  Kellogg  v.  Lar- 
kin  (3  Pinney  Wis.  Kep.,  150).       - 

"If  it  be  true,  also,  that  competition  is  the  life  of  trade, 
it  m*iy  follow  such  premises  that  he  who  relaxes  competition 
commits  an  act  injurious  to  trade  ;  and  not  only  so,  but  he 
commits  an  overt  act  of  treason  against  the  commonwealth. 
But  I  apprehend  it  is  not  true  that  competition  is  the  life  of 
trade.  On  the  contrary,  that  maxim  is  the  least  reliable  of 
the  host  which  may  be  picked  up  in  every  market-place.  It 
is,  in  fact,  the  shibboleth  of  mere  gambling  specula- 
tion, and  is  hardly  entitled  to  take  rank  as  an  axiom  in  the 
jurisprudence  of  the  country.  I  believe  universal  observa- 
tion will  attest  that  for  the  last  quarter  of  a  century  compe- 
tition in  trade  has  caused  more  individual  distress,  if  not 
more  public  injury,  than  the  want  of  competition." 

This  misleading  aphorism,  "Competition  is  the  life  of 
trade,"  is  refuted  by  every  labor  organization  and  every 
trade  organization  in  restraint  of  destructive  competition — 
organizations  which  stand  for  the  protection  of  labor  and 
for  the  protection  of  commerce. 

The  second  aphorism  above  quoted,  "  Where  combination 
/'.v  possible  competition  is  impossible"  is  also  thoroughly  ex- 
ploded. Combination  is  the  most  pronounced  symptom  of  our 
refined  and  highly  organized  civilization.  By  it  the  largest 
results  in  science,  in  art,  in  trade,  in  transportation,  and  in 
education  are  being  evoked.  A  prevailing  fault  of  the 
present  day  is  the  failure  to  discriminate  between  combina- 
tions for  good  and  combinations  for  evil — between  combina- 
tions which  protect  legitimate  competition  and  promote 
progress,  and  combinations  which  stifle  competition  and  ar- 


24 

rest  progress.  Experience  also  clearly  proves  that  the 
American  Railroad  System,  that  vast  combination  which  is 
neither  the  result  of  legislative  nor  of  railroad  corporate  de- 
visement,  but  the  manifest  outcome  of  an  evolution  beyond 
all  human  prescience,  is  a  combination  thoroughly  benefi- 
cent and  regulative  of  evils,  and  in  the  most  complete  sense 
promotive  of  the  public  interests.  Tins  is  so  clear  to  the 
comprehension  of  every  intelligent  observer  that  any  attempt 
to  prove  it  would  be  the  merest  superfluity  of  speech. 

In  the  face  of  all  these  lessons  of  experience  and  of  sound 
reason  as  to  the  necessity  of  restraint  upon  the  absolute 
freedom  of  railroad  transportation,  the  progress  of  reform  has 
been  from  the  beginning  and  is  to-day  impeded  by  a  persistent 
adherence  to  the  idea  of  the  absolute  freedom  of  competition 
among  railroads.  But  state  and  national  railroad  regu- 
lation stand  as  a  public  protest  against  such  views,  and  all 
experience  clearly  proves  that  if  the  various  restraints  which 
are  now  imposed  upon  the  absolute  freedom  of  railroad 
transportation  were  to  be  suddenly  abandoned  the  com- 
merce of  the  country  would  be  thrown  into  the  direst  con- 
fusion. 

Notwithstanding  the  faith  reposed  by  the  present  and  by 
past  generations  in  the  efficacy  of  competition,  the  doctrine 
has  prevailed  for  nearly  two  centuries,  as  an  element  of 
English  law,  that  competition  is  and  ought  to  be  subject  to 
just  and  wholesome  restraints. 

In  the  case  of  Mitchell  v.  Reynolds,  decided  about  the 
year  1711,  and  reported  in  "  Smith's  Leading  Cases,"  the 
policy  of  the  law  of  England  at  that  time  is  stated  as  fol- 
lows : 


25 

"  The  present  doctrine  is  that  while  contracts  in  total 
restraint  of  trade  are  void,  yet  if  the  restraints  imposed  be 
partial,  reasonable,  and  founded  on  good  consideration,  they 
are  valid  and  will  be  enforced." 

This  doctrine  has  been,  time  and  again,  asserted  judicially 

0 

in  this  country,  and  it  has  become  a  thoroughly  fixed  prin- 
ciple of  American  law. 

Governmental  Regulations  of  the  Railroads. 

It  was  impossible  that  such  a  mighty  evolution  of  com- 
mercial and  transportation  interests  as  that  already  de- 
scribed could  have  taken  place  in  this  land  of  liberty,  regu- 
lated by  law,  without  giving  rise  to  some  manifestations  of 
governmental  power.  It  became  necessary  not  only  to  im- 
pose restraints  upon  evils  but  also  to  give  legal  effect  to 
practices  and  usages  established  through  the  interaction  of 
forces  and  proved  by  the  lessons  of  experience  to  be  bene- 
ficial and  necessary.  The  political  solution  of  the  so-called 
"railroad  problem"  has  for  a  generation  harassed  the  legis- 
lative and  the  judicial  mind  of  this  country.  Many  carefully 
wrought-out  plans  and  expedients  for  correcting  real  and 
supposed  evils  have  been  devised,  a  large  proportion  of 
which  plans  have  resulted  in  failure.  But  under  all  the  dif- 
ficulties which  surround  the  task  that  is  not  a  strange  thing. 
As  the  explorer  approaches  the  harbor  of  a  strange  coast,  he 
finds  where  the  channel  is  by  running  into  shallow  water. 

As  this  paper  treats  of  the  railroads  only  from  a  national 
point  of  view,  reference  to  governmental  regulation  must  be 
confined  to  national  legislation. 


26 

All  that  there  is  in  the  Interstate  Commerce  Act  of  Feb- 
ruary 4,  lb'89,  in  the  nature  of  beneficent  regulation  is 
based  either  upon  common-law  requirements  applicable  to 
the  railroad  or  upon  usages  proved  to  be  wholesome  and 
proper  in  the  course  of  the  evolution  of  the  American  Rail- 
road System.  The  provisions  of  the  statute  which  relate  to 
the  prohibition  of  unreasonable  rates  and  unjust  discrimi-  - 
nations  are  simply  re-enactments  of  time-honored  rules  of 
the  common  law.  The  provisions  which  relate  to  securing 
shipments  on  direct  and  most  convenient  lines  were  already 
in  force  as  rules  of  railroad  associations.  The  propriety  of 
this  latter  rule  of  conduct  was  clearly  enunciated  as  long 
ago  as  the  year  1874,  in  the  report  of  the  investigating  com- 
mittee appointed  by  the  Pennsylvania  Railroad  Company. 
That  report  clearly  announced  the  doctrine  that  railroad 
companies  recognize  their  true  interest  in  furnishing  ample 
facilities,  and  by  refraining  from  unwise  efforts  to  defeat  the 
interests  of  the  shipper  in  the  matter  of  attempting  to  dictate 
the  route  or  destination  of  traffic,  that  being  determined 
mainly  by  elements  other  than  the  way  of  carriage. 

The  provisions  of  the  sixth  section  of  the  Interstate  Com- 
merce Act,  relating  to  joint  rates,  the  maintenance  of  agreed 
rates,  the  -publication  of  rates,  and  ample  notice  of  intended 
changes  in  rates,  were,  prior  to  their  enactment,  cardinal 
features  of  the  regulations  established  by  railroad  associa- 
tions. It  was  also  the  fundamental  object  of  such  associa- 
tions to  prevent  all  forms  of  rate-cutting  now  forbidden  by 
the  Interstate  Commerce  Act.  Outside  of  these  wholesome 
regulations  the  provisions  of  the  Act  to  Regulate  Commerce 
may  be  described  as  quasi -judicial  and,  in  a  qualified  sense, 
administrative. 


27 


The  Commercial  Environment  of  the  Americas   Railroad 

System. 

It  is  impossible  to  arrive  at  a  clear  view  of  that  interaction 
of  forces  whereby  the  American  Railroad  System  lias  been 
evolved  without  at  least  some  brief  reference  to  the  influences 
which  have  been  exerted  by  the  commercial  forces  of  the 
country.  This  wonderful  system  of  transportation  brought 
every  centre  of  trade  and  of  industry  into  close  competition, 
and  also  provided  a  means  whereby  the  product  of  every 
farm  and  every  mine  may  be  speedily  placed  at  the  gates  of 
commerce.  The  joint  traffic  arrangements  entered  into  among 
railroad  companies  had  corresponding  commercial  expres- 
sions in  through  bills  of  lading  and  other  commercial  arrange- 
ments, associating  transportation  in  vitally  important  partic- 
ulars with  trade  and  with  the  finance  of  commerce.  All  this, 
in  connection  with  the  facilities  for  commercial  intelligence 
afforded  by  the  telegraph  and  the  public  press,  has  both 
directly  and  indirectly  created  a  competition  of  commercial 
forces,  the  intensity  and  coercive  force  of  which  was  never 
before  experienced  on  this  planet.  The  tendency  of  this  far- 
reaching  and  instant  competition  has  been  irresistibly  toward 
a  parity  of  values  and  toward  a  constant  reduction  in  prices. 
This  has  reacted  upon  the  railroads  as  an  absolute  limitation 
upon  rate-making  which  no  traffic  manager  can  resist.  For 
example,  if  the  price  of  wheat  in  Chicago  is  ninety  cents  and 
in  New  York  one  dollar  and  ten  cents  a  bushel,  the  cost  of 
transportation  must  be  somewhat  less  than  twenty  cents  in 
order  to  insure  the  movement  of  wheat. 

There  is  no  popular  fallacy  more   misleading   than   the 


28 

assumption  that  the  railroad  managers  of  the  country  exer- 
cise a  very  wide  range  of  discretion  in  the  matter  of  rate- 
making.  In  spite  of  every  expedient  adopted  by  the  com- 
panies to  keep  rates  up,  they  have  fallen,  while  traffic  has 
increased.  This  is  illustrated  by  the  fact  that  the  average 
charge  per  ton  per  mile  on  eighteen  of  the  principal  rail- 
roads of  the  country  fell  from  2.101  cents  in  1872  to  .868 
in  1891,  a  decrease  of  60  per  cent.,  while  the  tonnage  car- 
ried more  than  doubled  during  that  period.  When  the 
Windom  Senate  Committee  on  "Transportation  Routes  to 
the  Seaboard  "  began  its  work  in  the  year  of  1873,  the  aver- 
age all-rail  rate  for  the  transportation  of  wheat  from  Chicago 
to  New  York  was  33.5  cents  a  bushel,  but  during  the  year 
1892  it  was  only  14.23  cents  a  bushel.  That  committee 
devoted  its  attention  particularly  to  the  possibilities  of  cheap 
transportation  by  water.  In  the  year  1872  the  average  total 
charge  for  transporting  a  bushel  of  wheat  from  Chicago  to 
New  York  city  by  lake  and  canal  was  24.47  cents  a  bushel. 
The  committee  concluded  that  if  the  cost  of  transporting 
wheat  from  Chicago  to  New  York  by  water  could  be  reduced 
to  about  18  cents  per  bushel  cheap  transportation  would  be 
fully  secured  independently  of  railroad  transportation.  But 
during  the  year  1892  the  total  charge  for  transporting  wheat 
from  Chicago  to  New  York  by  lake  and  canal  was  reduced 
to  5.61  cents  a  bushel,  and,  as  before  stated,  the  average 
rail  rate  was  reduced  to  14.23  cents.  Such  reduction  in  thex 
rates  charged  on  railroads  have  been  very  largely  the  result 
of  the  competition  of  commercial  forces  operative  through 
rival  transportation  lines.  The  reduction  of  freight  charges 
between  the  west  and  the  Atlantic  seaboard  is  also,  as  we 


all  know,  due  very  largely  to  the  marvelous  reduction  in  the 
cost  of  transportation  by  lake,  Erie  canal,  and  Hudson 
river.  This  has  been  effected  in  part  by  the  generous 
policy  adopted  by  the  State  of  New  York  in  making  the 
canals  of  that  State  free  of  tolls  by  imposing  a  tax  of  over 
nine  hundred  thousand  dollars  a  year  upon  the  people  of 
that  great  State.  The  railroad  companies  have  been  able 
to  live  under  such  constraint  upon  them  only  by  physical 
improvements  in  the  construction  of  railroads  and  their 
equipment,  and  by  labor-saving  devices  and  other  economies 
introduced  in  the  operation  of  railroads. 

The  influence  which  commercial  forces  necessarily  exert 
upon  transportation  charges  may  also  be  inferred  from  the 
fact  that  the  value  of  goods  transported  on  railroads  each 
year  is  about  three  times  the  value  of  all  the  railroad 
properties  of  the  country  and  at  least  thirty  times  the  total 
railroad  receipts  each  year  from  freight  traffic.  From  these 
facts  it  is  evident  that  the  commercial  forces  of  the  country 
exert  a  preponderating  influence  not  only  over  rates  but 
also  over  the  movement  of  traffic.  In  a  word,  the  course  of 
the  internal  commerce  of  the  country  is  to-day  mainly  de- 
termined by  commercial  forces.  The  interaction  of  these 
forces  is  manifest  in  the  fierce  struggle  of  rival  cities  and  of 
riva^  productive  areas — in  the  competition  of  soil  with  soil, 
of  mine  with  mine,  and  of  industry  with  industry.  Then 
descending  to  the  detail  of  railroad  traffic  there  is  the 
struggle  of  individual  shippers,  chiefly  the  larger  shippers, 
to  secure  unjustly  discriminating  rates  in  their  own  favor, 
while  at  the  same  time  the  competition  of  rival  railroads 
through  their  complex  arrangements  of  soliciting  agencies 


30 

and  the  practical  abrogating  of  the  central  rate-making 
power  has  had  a  tendency  to  render  the  whole  subject  of 
making  and  maintaining  just  and  equitable  rates  absolutely 
impossible  in  the  absence  of  wholesome  and  just  restraints 
upon  the  evils  already  described. 

The    American      Railroad     System. — Its     Genesis     and 

Evolution. 

Thus  far  attention  has  been  directed  to  the  extension  of 
railroads  in  the  United  States,  the  vast  and  varied  commer- 
cial and  industrial  x interests  which  the  railroad  has  been 
the  means  of  creating,  and  the  evils  encountered  and  in 
a  great  degree  overcome,  in  adjusting  this  potential  agency 
of  transportation  to  the  commercial,  industrial,  social,  and 
political  interests  of  the  country.  This  grand  achievement, 
however,  is  mainly  the  result  of  an  evolution,  unobserved  in 
its  processes  until  recognized  in  its  splendid  consummation, — 
the  American  Railroad  System. 

Thirty-five  years  ago  the  railroads  of  the  United  States 
were  operated  as  separate  and  independent  highways  of 
commerce.  A  dozen  different  track  gauges  were  in  use. 
Besides,  the  bare  idea  of  connecting  the  tracks  of  different 
companies  having  a  terminus  in  the  same  town  was  repelled 
by  railroad  managers  as  something  in  the  nature  of  an  en- 
tangling alliance,  fraught  with  complications  and  administra- 
tive difficulties  which  had  better  be  avoided.  The  drayman 
and  the  forwarding  merchant  also  asserted  their  right  to 
live,  and  in  favoring  the  transfer  of  freights  the  railroad 
companies    had    respect    for    such    opposition.       Different 


31 

gauges  were  adopted  in  many  instances  for  the  express  pur- 
pose of  preventing  "  the  carriage  of  freights  from  being,  and 
licing  treated  as,  one  continuous  carriage  from  the  place  of 
shipment  to  the  place  of  destination,"  a  practice  now  treated 
by  the  Interstate  Commerce  Act  as  a  public  offence  (see  sec- 
tion 7).  One  of  the  latest  and  perhaps  most  notable  in- 
stances of  the  policy  of  breaking  gauge  for  the  specific 
purpose  of  securing  to  a  city  the  commercial  advantages 
which  that  expedient  was  supposed  to  afford  was  that  of  the 
Cincinnati  Southern  Eailroad,  an  important  line,  336  miles 
in  length,  built  by  the  city  of  Cincinnati,  and  completed 
about  the  year  1880.  The  cars  of  different  companies  were 
also  so  differently  constructed  as  not  to  be  easily  hauled 
together  in  trains. 

But  the  social,  commercial,  postal,  and  military  necessities 
of  the  age  rapidly  brushed  aside  all  obstacles  to  the  forma- 
tion of  that  great  system  of  railroad  transportation  which  is 
to-day  unto  the  traveller  and  the  shipper  as  one  instrumen- 
tality of  transportation,  embracing  nearly  200,000  miles  o,f 
track,  administered  and  operated  as  though  by  one  central 
authority.  This  wonderful  organic  development  has  involved 
connected  tracks,  a  common  track  gauge,  union  depots, 
through  rates,  the  uniform  classification  of  commodities,  rate 
agreements,  prorating,  through  tickets,  related  time  schedules, 
the  unimpeded  passage  of  freight,  passenger,  express,  and 
postal  cars  and  locomotives  over  the  tracks  of  different  com- 
panies, and  to  a  considerable  extent  the  employment  of  oper- 
atives  in  the  pay  of  one  company  upon  the  lines  of  other 
companies.  Each  company  has  also  become,  in  ten  thousand 
instances,  the  agent  of  many  other  companies  tor  the  sale  of 


32 

tickets,  the  collection  of  freight  moneys,  and  the  procurement 
of  traffic.  The  movement  in  favor  of  a  common  automatic 
car-coupler,  of  which  movement  Hon.  Edward  A.  Moseley, 
Secretary  of  the  Interstate  Commerce  Commission,  has  been 
the  most  conspicuous  proponent  and  advocate,  was  suggested 
and  has  been  carried  to  a  point  at  which  success  seems  to  be 
assured,  by  none  other  than  hummie  purposes  toward  rail- 
road employes;  but  this  common  interlocking  connection 
between  freight  cars  is  exerting  an  important  influence 
toward  securing  the  perfect  physical  unity  of  the  American 
Railroad  System. 

The  practical  unification  of  the  great  work  of  transporta- 
tion by  rail  has  come  about  not  advisedly,  or  as  the  result  of 
design  or  forecast  on  the  part  of  the  companies,  but  as  the 
outcome  of  an  evolution.  Obstacles  to  the  union  of  lines  and 
the  correlation  of  traffic  interests  which  at  first  appeared  in- 
superable have  been  swept  aside  by  an  imperious  force  of  cir- 
cumstances. Moreover,  every  effective  measure  of  restraint 
and  every  instrumentality  which  has  advanced  the  efficiency  of 
the  railroad  as  an  instrument  of  commerce  seems,  by  an  im- 
perious law  of  development,  to  have  tended  toward  the  evolu- 
tion of  the  American  Railroad  System. 

During  this  entire  period  of  progress  railroad  managers 
have  been  divided  into  two  schools  in  regard  to  the  new  de- 
velopment. For  years  a  majority  opposed,  and  a  minority 
favored  it.  Some  of  the  stronger  companies  attempted  to 
resist  the  movement  by  the  consolidation  and  extension  of 
their  lines,  assuming  that  thus  they  might  be  enabled  to  re- 
main a  law  unto  themselves.  But  in  time  they,  too,  were 
forced  to  acknowledge  the  compulsions  of  the  interdependent 


33 

relationships  which  were  slowly  but  surely  evolving  one  vast 
national  railroad  system.  The  peculiar  environment  of  each 
road,  of  course,  had  much  to  do  with  the  detail  of  forming 
connections  with  coterminous  roads.  But  above  every  con- 
ceivable objection,  and  every  possible  obstruction,  there 
arose  an  imperious  commercial  and  social  demand  for  a 
united  American  railroad  service.  Upon  the  outbreak  of  the 
late  war,  which  was  to  determine  the  question  of  maintaining 
our  national  unity,  military  necessity  demanded  through 
cars  and  through  trains  over  the  lines  of  different  companies. 
The  tracks  of  railroads  having  terminals  on  opposite  sides 
of  cities  were  accordingly  connected  by  lines  constructed 
through  or  around  such  cities  in  order  that  men  and  muni- 
tions of  war  might  pass  unimpeded.  The  military  demand 
for  an  expedited  postal  service  also  gave  rise  to  the  railway 
post-office,  by  which  means  the  work  of  assorting  and  dis- 
tributing the  mails  is  now  done  chiefly  on  trains  in  motion. 
Then  the  sleeping-car  came  in  vogue,  with  a  rapidly  devel- 
oped and  imperative  demand  for  connected  tracks  and 
through  service  over  the  lines  of  two,  three,  and  four  or  more 
different  companies.  It  was  in  vain  that  conservative  rail- 
road men  protested  against  the  loss  of  independence  and  the 
inconveniences  and  vexations  incident  to  forced  partnerships 
with  companies  and  with  railroad  officials  whom  they  would 
gladly  have  shunned.  The  most  serious  difficulties  arose  in 
the  establishment  of  a  through  or  interchangeable  freight-car 
service.  Sometimes  cars,  when  thus  employed,  far  from  tin; 
road  upon  which  they  belonged,  were  left  standing  for  days 
and  even  weeks  on  side  tracks  or  kept  in  use  without  an}' 
authority  or  compensation   for  such  service.     In   many  in- 


34 

stances  cars  were  thus  lost,  and  in  certain  cases  actually 
stolen  by  being  repainted  with  the  name  of  the  appropriating 
company  substituted  for  that  of  the  company  to  which  they 
belonged.  But  despite  all  these  inconveniences  the  effort  to 
prevent  a  common  use  of  freight  cars  was  futile.  In  time 
the  evils  just  alluded  to  were  in  a  large  degree  overcome  by 
car-service  agents  of  the  various  railroad  associations  and 
through  the  more  recently  formed  car-service  associations. 

In  treating  of  a  united  American  Railroad  System,  I  can- 
not fail  to  make  special  mention  of  the  inestimable  service 
performed  by  the  car- service  associations  of  the  United 
States.*  The  first  association  of  this  sort  was  organized 
October  1,  1887,  at  Omaha,  Nebraska,  by  Mr.  E.  Dickinson, 
General  Manager  of  the  Union  Pacific  Railway  Company, 
Mr.  G.  "W.  Holdredge,  General  Manager  of  the  Burlington 
&  Missouri  River  Railroad,  and  Mr.  J.  M.  Eddy,  Superin- 
tendent of  the  Missouri  Pacific  Railway.  Mr.  E.  E.  Hill 
was  the  first  car-service  manager.  From  this  beginning 
there  have  sprung  thirty-nine  car-service  associations,  whose 
field  of  operations  embraces  almost  the  entire  country.  The 
common  rule  of  these  associations  is  to  allow  a  car  to  stand 
48  hours  for  loading  and  unloading,  and  after  that  to  charge 
for  car  service  at  the  rate  of  one  dollar  a  day.  The  results 
attained  by  these  associations  is  indicated  by  the  fact  that 
prior  to  their  organization  the  detention  of  cars  amounted 
to  5.85  days  for  each  car  handled,  whereas  since  their 
organization  the  detention  has  been  only  1.45  days — a  sav- 
ing at  each  loading  and  unloading  of  4.40  days.     As  the  total 

*  I  desire  to  acknowledge  my  indebtedness  to  Mr.  A.  M.  Simmons,  Man- 
ager of  the  Cleveland  Car  Service  Association,  for  valuab'e  information 
upon  this  subject. 


35 

number  of  cars  handled  during  the  year  1892  was  11,108,487, 
the  total  number  of  car-days  service  saved  was  48,877,342. 
which  at  $1.50  a  day  amounts  to  $73:316,013.  Besides  this 
large  saving  to  the  companies,  they  are  enabled  to  give  the 
public  better  service,  and,  of  course,  also  to  afford  a  cheaper 
service.  The  courts,  recognizing  the  fact  that  "  the  life  of 
the  railroads  is  in  their  rolling  stock,"  have  fully  and  com- 
pletely recognized  the  legal  force  of  the  rules  and  regu- 
lations made  by  car-service  associations.  Perhaps  there  is 
no  other  feature  of  the  co-operative  relationships  which 
have  sprung  up  among  the  railroads  of  the  country  which 
so  strikingly  illustrates  the  organic  unity  of  the  American 
Railroad  System  as  the  work  performed  by  car-service 
associations. 

There  is  another  important  organization  whose  work  has 
constituted  an  important  feature  of  the  evolution  of  the 
American  Railroad  System.  I  refer  to  the  American  Rail- 
way Association,  of  which  Mr.  H.  S.  Haines,  of  New  York,  is 
now  and  has  been  president  since  the  year  1887.  This  as- 
sociation includes  in  its  membership  all  the  principal  rail- 
road companies  of  the  country.  Its  object  is  the  develop- 
ment and  solution  of  problems  connected  with  railroad  man- 
agement in  the  United  States.  It  is  a  deliberative  body, 
without  any  executive  authority  and  endowed  only  with  the 
function  of  recommending  the  adoption  of  its  conclusions. 
But  its  influence  and  power  for  good  has  been  very  great 
and  all  its  work  has  tended  toward  a  more  thorough  and 
beneficent  organization  of  the  American  Railroad  System. 

These  associations  and  other  co-operative  arrangements 
did  not  spring  out  of  the  ground.     They  are  the  result   of 


36      . 

the  careful  investigation  and  strenuous  effort  of  brainy 
men  whose  lives  have  been  controlled  by  the  best  and  most 
forceful  inspirations  of  human  progress. 

Finally,  in  the  face  of  untold  opposition  and  frictional 
resistances,  the  American  Railroad  System  emerged  in  its 
present  form  and  magnificent  potentialities  for  good. 

The  social,  commercial,  industrial,  and  political  forces  of 
the  country  have  beckoned  the  companies  on  to  this  unity 
of  transportation  facilities,  as  absolute  and  as  imperative  in 
its  manifestations  as  is  the  political  unity  which  binds  towns, 
countries,  and  States  into  a  nation  which  is  one  and 
indivisible.  State  governments  also  have  extended  solic- 
itous invitations  to  railroad  companies  to  construct  their 
lines  across  State  boundaries  in  order  to  form  such  connec- 
tions, and  in  so  doing  to  exercise  freely  one  of  the  most 
sacred  attributes  of  governmental  sovereignty — the  right  of 
eminent  domain. 

Twenty-seven  years  ago  a  concensus  of  the  social,  politi- 
cal, and  commercial  forces  of  the  country  led  to  a  statutory 
enactment  by  the  national  government  which  legalized  the 
physical  combination  of  railroad  interests  just  described.  I 
refer  to  the  act  of  Congress  approved  June  15,  1366.  This 
statute,  the  most  important  concerning  the  internal  com- 
merce of  the  United  States  which  has  ever  been  enacted  by 
Congress,  was  simply  a  legal  recognition  of  something  even 
then  existent  as  an  organic  characteristic  of  the  transporta- 
tion and  commercial  interests  of  the  country.  In  a  word, 
it  was  nothing  more  nor  less  than  the  statutory  approval  of 
an  institution  and  of  usages  which  had  become  expressions 
of  the  commercial  and  social  life  of  the  nation.  The  act  in 
question  reads  as  follows  : 


"  Au  act  to  facilitate  commercial,  postal,  and  military  com- 
munication among  the  States. 

AYhereas  the  Constitution  of  the  United  States  confers 
upon  Congress,  in  express  terms,  the  power  to  regulate  com- 
merce among  the  several  States,  to  establish  post-roads  and 
to  raise  and  support  armies  ;  therefore, 

"  Be  it  enacted  by  the  Senate  <iml  House  of  Representative 8 
of  the  United  States  in.  Congress  assembled,  That  every  rail- 
road company  in  the  United  States  whose  road  is  operated 
by  steam,  its  successors  and  assigns,  be,  and  is  hereby, 
authorized  to  carry  upon  and  over  its  road,  boats,  bridges, 
and  ferries  all  passengers,  troops,  Government  supplies, 
mails,  freight,  and  property  on  their  way  from  any  State  to 
another  State,  and  to  receive  compensation  therefor,  and  to 
connect  with  roads  of  other  States,  so  as  to  form  continuous 
lines  for  the  transportation  of  the  same  to  the  place  of  its 
destination. 

*  #  7f  *  *  * 

"Section  2.  And  be  it  further  enacted,  That  Congress  may 
at  any  time  alter,  amend,  or  repeal  this  act." 

This  act  of  Congress  fully  and  explicitly  authorizes  all  the 
railroad  combinations  and  co-operative  arrangements  which 
I  have  just  described.  In  form  and  substance  it  is  permis- 
sive and  clearly  in  the  nature  of  a  grant  of  power.  It  also 
expresses  an  implied  contract,  viz.,  a  duty  to  be  performed 
in  consideration  of  a  privilege  granted.  Therefore  it  may 
properly  be  regarded  as  The  Charter  of  The  A  merican  Rail- 
road System. 

That  it  had  this  significance  in  the  minds  of  its  Cramers  i> 
clearly  indicated  by  the  fact  that  out  of  abuudant  caution  it 
was  provided  in  the  second  section  "  that  Congress  ma\  at 
any  tine'  alter,  amend,  or  repeal  this  act."     This  latter  pro- 


38    . 

vision  was  apparently  prompted  by  a  fear,  even  then  enter- 
tained by  many,  that  such  intimate  combinations  among  the 
railroads  might,  in  the  course  of  their  development,  prove 
detrimental  to  the  public  interests.  That  apprehension, 
however,  no  longer  has  place  in  the  minds  of  the  American 
people. 

But  the  American  Railroad  System  has  a  higher  charter 
even  than  this  statutory  enactment,  and  that  is  the  very 
charter  of  government  itself — the  will  of  the  people,  for  this 
act  formulates  at  once  the  public  needs  and  the  public  sense 
of  what  is  necessary  and  proper  concerning  railroad  trans- 
portation in  this  country.     . 

The  beneficent  character  of  the  act  of  June  15,  1866,  has 
been  abundantly  demonstrated  by  the  lessons  of  experience, 
and  there  is  to-day  no  purpose  more  firmly  fixed  in  the 
minds  of  the  American  people  than  that  our  internal  com- 
merce shall  have  free  and  uninterrupted  passage.  And  it  is 
a  source  of  national  pride  that  to-day  the  railroads  of  the 
country  do  present  themselves  to  the  traveller  and  the  ship- 
per practically  as  one  vast  system  of  transportation,  peerless 
in  magnitude  and  efficiency. 

The  growing  conviction  in  the  public  mind  as  to  what  is 
right  and  necessary  regarding  the  American  Ttailroad  Sys- 
tem has  found  vigorous  expression  in  provisions  of  the 
Interstate  Commerce  Act  of  February  4,  1887.  This  act  is 
from  beginning  to  ending  based  upon  the  idea  of  an  existent 
American  railroad  system,  its  needs  and  possibilities. 
Although  the  legislator  may  not  have  had  clearly  in  mind 
this  particular  significance  of  the  statute,  such  inadvertence 
illustrates  the    fact  that  in  the   processes  of  an   evolution 


39 

men  usually  build  bettor  than  they  know.  That  the  Inter- 
state Commerce  Act  was  based  upon  the  conditions  imposed 
by  the  law  of  the  American  Railroad  System  is  clearly  indi- 
cated by  sections  3,  7,  and  10  of  that  act,  which,  stripped  of 
legal  amplification,  are  as  follows  : 

A  (Sec.  3).  Facilities  for  interchange  of  traffic.  Every 
common  carrier  shall  afford  all  reasonable,  proper,  and  equal 
facilities  for  the  interchange  of  traffic  between  their  respec- 
tive line?  and  those  connecting  therewith. 

B  (Sec.  7).  Continuous  carriage.  It  shall  be  unlawful  for 
any  common  carrier  subject  to  the  provisions  of  this  act  to 
enter  into  any  combination,  contract,  or  agreement,  expressed 
or  implied,  to  prevent  the  carriage  of  freights  from  being 
continuous  from  the  place  of  shipment  to  the  place  of  desti- 
nation. 

C  (Sec.  10).  Penalties  for  violation.  Any  common  carrier 
subject  to  the  provisions  of  this  act,  or  any  director  or  officer 
thereof,  or  any  receiver,  trustee,  lessee,  agent,  or  person  em- 
ployed by  such  corporation,  who  alone  or  with  any  other 
corporation,  company,  person,  or  party  shall  wilfully  do  or 
cause  to  be  done  anything  in  this  act  prohibited,  or  who 
shall  wilfully  omit  to  do  anything  in  this  act  required  to  be 
done,  shall,  upon  conviction  thereof,  be  subject  to  a  fine  of 
not  to  exceed  five  thousand  dollars. 

These  provisions  of  the  Interstate  Commerce  Act  clearly 
define  certain  commercial  objects  which  the  charter  of  the 
American  Railroad  System  of  June  15,  180(1,  \\;i>  intended 
to  secure,  and  they  simply  formulate  and  give  the  sanction 
of  law  to  the  already  evolved  law  of  that  system. 

When  "  The  Act  to  Regulate  Commerce,"  commonly  known 
Sfl  '  The  Interstate  Commerce  Act,"  took  effect,  July  5, 1887, 
the  constitutional   power  conferred  upon  Congress  of  regu- 


40 

lating  "  commerce  among  the  States  "  had  been  practically 
dormant  for  a  period  of  98  years.  Prior  to  the  enactment 
of  that  statute  the  American  Railway  System  had  been 
evolved,  and  it  had  become  the  grandest  system  of  trans- 
portation ever  seen  on  this  globe  in  point  of  speedy  carriage, 
the  facilities  afforded  for  the  distribution  of  freights,  regu- 
larity of  movement,  safet}-,  cost  of  transportation,  and  gen- 
eral efficiency.  The  practical  duty  now  devolving  upon  the 
legislator  in  devising  a  general  scheme  of  railroad  legislation 
is  that  of  building  up  a  body  of  statute  law,  based  upon  and 
voicing  the  tendencies,  the  needs,  and  the  possibilities  of  the 
evolved  law  of  the  American  Railroad  System.  The  Inter- 
state Commerce  Act  inaugurated  such  legislation. 

By  the  lessons  of  a  hard  experience,  involving  the  consid- 
eration of  many  an  asserted  "  solution  of  the  whole  ques- 
tion," we  have  come  to  recognize  in  the  American  Railroad 
System  a  fresh  illustration  of  that  cardinal  principle  of  free 
government,  that  the  evolutionary  experiences  of  human  so- 
ciety furnish  the  surest  foundation  of  beneficent  law  and  of 
good  government.  Hence  it  appears  that  the  chief  duty  of 
the  railroad  manager,  of  the  student  of  our  transportation 
interests,  and  of  the  American  legislator,  in  all  attempts  to 
advance  the  efficiency  of  the  American  Railroad  System  and 
to  conform  it  to  the  public  needs,  is  to  study  the  course  of 
its  evolution,  and,  if  possible,  to  catch  the  drift  of  its  best 
tendencies.  This,  in  the  very  nature  of  things,  must  always 
be  a  tentative  work.  Disappointment  may  overwhelm  many 
a  sincere  effort,  for  every  investigation  and  every  earnest  at- 
tempt at  reform  is  always  more  or  less  in  the  nature  of  groping 
one's  way  out  of  the  darkness  into  the   light.     So  the  work 


41 

must  go  on,  and  it  will  probably  be  realized  fifty  years  hence 
by  men  engaged  in  such  practical  studies  as  those  which 
now  command  our  thoughts  that  "there  is  a  divinity  which 
shapes  our  ends,"  and  that  unless  men  "  build  better  than 
they  know  they  will  build  in  vain."  And  I  doubt  not  that 
the  most  effective  workers  in  the  great  task  of  adjusting  the 
railroads  to  the  public  interests  will  be  found  to  be  among 
those  who,  in  the  language  of  Mr.  Gladstone,  have  "  learned 
to  submit  themselves  to  the  lessons  of  experience  and  to  the 
lessons  of  the  hour." 


A  western  railroad  manager  of  large  experience,  for  whose  judgment  I 
have  great  respect,  offers  me  the  following  criticism.  He  thinks  the  fol- 
lowing statements,  which  may  be  found  on  page  8  of  this  pamphlet,  are 
rather  overdrawn : 

''Discriminations  as  between  shippers  under  like  conditions  became  the 
rule,  and  rate-making,  in  almost  all  cases,  became  a  matter  of  contrivance  as 
between  individual  shippers  and  an  army  of  irresponsible  soliciting  freight 
agents." 

And  again,  at  the  bottom  of  page  8:  ''Falsehood  and  deception  became 
the  rule  and  fair  dealing  the  exception." 

I  desire  to  explain  those  expressions  as  follows :  First,  they  relate  espe- 
cially to  a  condition  of  affairs  prevailing  for  a  period  prior  to  the  year  1885, 
chiefly  on  lines  and  at  commercial  centres  east  of  Buffalo  and  Pittsburgh  : 
second,  they  relate  almost  entirely  to  competitive  traffic,  and.  third,  they  re- 
late particularly  to  the  transportation  of  merchandise  shipped  by  jobbers 
and  other  wholesale  dealers,  and  by  manufacturers  and  other  large  pro- 
ducers. 

My  correspondent  regards  the  above-quoted  statements  as  rather  severe  on 
railroad  managers,  whom  he  believes  to  be  fully  as  fair  and  honorable  in  their 
dealings  as  are  merchants  generally.  I  fully  concede  this,  and  refer  to  the 
following  expression  on  page  7  :  "  This  procedure  was  not  an  expression  of 
caprice,  or  of  any  vicious  propensity  on  the  part  of  railroad  manager*.  It 
was  dictated  by  a  force  of  circumstance  and  a  compulsion  of  environing 
conditions  entirely  beyond  their  control,  and  it  constituted  a  phase  in  the 
processes  of  a  mighty  evolution."  And  again  on  page  14  :  "  Usually  such 
rate-cutting  was  based  upon  representations  of  shippers,  sometimes  true 
and  sometimes  false,  to  the  effect  that  offers  of  cut  rates  had  been  made 
to  them  by  the  agents  of  competing  lines." 

The  sole  object  which  I  have  had  in  view  in  the  portion  of  my  address  bo 

which  the  above-mentioued  criticisms  relate  was  to  describe  a  condition  of 

affairs  in  the  evolution  of  the  American  Railroad  System  which  rendered 

inevitable  the  evil  practices  which  I  have  endeavored  to  describe,  and  I  am 

not   unwilling  to  admit  that  this  explanation  may  be  necessary  in  order 

clearly  to  manifest  that  purpose 

JOSEPH  NTMMO,  Jr. 

Washington.  D.  C. 

July  12,  1893. 


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